Informa Telecoms & Media: Mobile operators need to introduce flat-rate pricing to build a mobile eco-system

Mark Newman at Informa Telecoms & Media has a lengthy piece of the pricing structure for network operators. He states that "broadband or Internet charging structures in the mobile and fixed worlds bear no resemblance whatsoever." He notes that "flat rate broadband charging structures have become the norm on the fixed network. People are happy to pay a flat monthly fee based on the speed of the network connection. This flat fee allows you to use the internet, send emails and make phone calls via VOIP. Essentially, you can do whatever you want with your broadband connection (efforts by some ISPs to bar Skype VOIP calls have largely mostly failed)."

Newman states that:

Mobile operators on the other hand, seem to have gone out of their way to make pricing as confusing as possible. Operators tend to bill people for the services they use rather than levying a flat rate access fee. They offer lots of different services over 2.5G and 3G networks so there are lots of different price plans. And pricing philosophy tends to change from one operator to the next.

He then describes the various methods for pricing within the industry and thinks "that until mobile operators adopt the same flat rate pricing approach as in broadband, new services will not take off." Newman then writes why the industry is hesitant to move to this flat-rate pricing schema, from VoIP to network performance issues. He writes:

But arguably the biggest barrier to flat-rate pricing is the reality that there is so little 'free' content or services available on the mobile 'internet' that it would not be an attractive proposition for customers. The only way that this is going to change is if initiatives such as .mobi gain momentum or if operators and handset manufacturers can come up with a breakthrough technology that allows people to navigate and use the existing worldwide web.

Away from the mobile Internet, operators are pinning their hopes on mobile television. Their pricing approaches for mobile TV will mirror existing services - flat rate monthly fees for unlimited access to a defined set of channels. Maybe they are more relaxed about offering mobile TV as a flat rate service because it uses one-to-many broadcast technology where capacity limitations are not an issue.

Newman thinks that "in the longer term, mobile television and multiple-play services will force operators into a flat-rate pricing approach. But the real issue is whether they want to introduce pricing models now that inject some life into 3G and get people using services to prime the market." He concludes with:

The challenge for mobile operators is settling on a pricing approach for mobile broadband services that helps to generate interest in existing services, that helps to grow a mobile eco-system (like those created by DoCoMo and other Japanese operators) and that can accommodate the arrival of mobile television and 'multiple play' strategies. If they fail to do so then Internet business models and pricing schemes will take over.